Savers can now make a meaningful impact with their money without sacrificing decent returns, thanks to National Savings and Investments (NS&I) raising the rate on its green bond to 5.7%. Backed by the UK government, this three-year deal offers a competitive rate and restricts access to funds during this period.
Investing in the green savings bond supports government-selected projects, such as offshore windfarms, flood defenses, tree-planting, and sustainable farming schemes. The popularity of these bonds is evident, with over £915 million already invested since their announcement in the spring budget of 2021.
Compared to the previous rate of 4.2%, the new rate is a significant improvement. Industry experts acknowledge that the small sacrifice in returns made by choosing the green bond is outweighed by its impact. It just falls short of the market-leading three-year account rate of 6.05%, meaning savers forgo approximately £35 in yearly interest for the opportunity to go green.
Although Gatehouse Bank’s three-year Woodland Saver, which pays 5.5% and plants a tree for every account opened, sits close to NS&I’s rate, NS&I takes the lead. The fixed-rate savings market has become increasingly competitive as challenger banks challenge traditional providers for market share.
Thanks to the rising Bank of England base rate, challenger banks are able to offer better returns, constantly reshuffling the best-buy tables with new account offerings. While NS&I allows a 30-day cooling-off period for savers to switch accounts, they must commit to the full three-year term for withdrawals.
Those who recently opened the NS&I bond at the lower rate should check if they still fall within the cooling-off period, advises Laura Suter, Head of Personal Finance at AJ Bell. Savers struggle to determine the ideal time to secure fixed rates due to the fast-paced nature of the market.
Suter also suggests considering future improvements in fixed rates, as the base rate is expected to climb further. Committing funds for three years without early withdrawal options requires careful consideration.
Dax Harkins, NS&I’s Chief Executive, views the rate increase as an attractive proposition for savers seeking guaranteed returns while supporting environmental causes. Though not leading the market, Mark Hicks, Head of Savings at Hargreaves Lansdown, believes it provides an appealing option for those looking to make a positive impact.
To open an account, individuals aged 16 or older must deposit £100 to £100,000. Accounts can be conveniently opened on NS&I’s website: nsandi.com.
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